Shipping is an international industry, which depends upon an international regulatory environment if it is to operate efficiently. Politicians and government officials need to understand that the industry’s safety and pollution record is set at risk whenever the global regulatory framework is disregarded. ICS and ISF have therefore been very disappointed by the outcome of discussions in the European Parliament about the EU Directive on Criminal Sanctions for Ship Source Pollution. Due to be adopted during 2005, the Directive will permit seafarers to be criminalised and threatened with imprisonment for genuine accidents, placing it in conflict with the obligation of EU States under the IMO Convention for the Prevention of Pollution from Ships (MARPOL).

The industry fully accepts the need for appropriate punishment for deliberate violations of environmental rules and supports the broad intention of the EU Directive, but cannot understand the refusal to make the small changes needed to bring it into line with international law. MARPOL clearly states that pollution from ships is not a criminal action unless committed ‘with intent to cause damage or recklessly and with knowledge that damage would probably result’. This reflects the view of IMO that criminalising accidents is neither reasonable nor just given the physical hazards that exist at sea. In maritime law, there is little understanding of the term ‘serious negligence’ as contained in the draft EU Directive, and there is a distinct danger that the definition of ‘serious’ will be determined by the scale of an accident rather than the extent of any responsibility on the part of the company or seafarers.

The European Commission has insisted that the Directive is consistent with IMO rules, despite unanimous opposition from pilots’, ports’ and seafarers’ organisations in addition to that from shipowners. Particularly disappointing was that the recently elected European Parliament reversed some of the improvements that it had previously made to the Directive, apparently driven by a desire to avoid conflict with the Commission.

The various EU institutions have failed to respond to industry questions about what impact the Directive will have on the conduct of accident investigations. The intention to apply criminal penalties for accidents to ships and crew in EU territorial waters would also appear to undermine EU plans for ships that get into difficulty to use agreed places of refuge. In addition there is a clear need to take account of any action by ships’ crews to mitigate pollution following an incident. It is hoped that these issues, including the avoidance of any conflict with MARPOL, will be thoroughly addressed by national authorities when they come to implement the EU Directive. But the outcome of the debate in Brussels has been far from satisfactory.

The threat of criminal sanctions for genuine accidents, again in conflict with MARPOL, has also raised its head in Canada as a result of proposals to extend laws governing the protection of birds to accidental pollution that might be caused by ships. While sympathising with the intention of eliminating pollution damage, the industry has emphasised the importance of upholding Canada’s maritime treaty obligations, and the wide range of measures that already exist to counter sub-standard shipping. To this end ICS participated, in co-operation with the Canadian Shipowners’ Association, in a Senate hearing in Ottawa in March 2005.

Although the Master of the ill-fated ‘Prestige’ has been allowed to return to Greece after months of incarceration and two years’ restricted movement in Spain pending trial, it is clear that there is a trend towards seafarers becoming scapegoats in attempts to attribute blame following a casualty. In January 2005 ISF/ICS co-ordinated industry representation at an IMO/ILO Working Group - established at the prompting of industry and trade unions - which started to develop guidelines on the fair treatment of seafarers by law enforcement authorities following serious casualties. While less progress was made than had been hoped, the draft guidelines will be further developed for adoption by IMO and ILO during 2005.

Under the international regime established by the Civil Liability (CLC) and Fund Conventions hundreds of millions of dollars are available to compensate victims of oil spills. In accordance with a pre-agreed formula, the costs are met in the first instance by the shipowner, supplemented as necessary by the oil industry. Access to compensation is not delayed by legal disputes concerning responsibility for the spill, since liability is established regardless of fault.

ICS remains firmly opposed to the reopening of these Conventions which have successfully delivered prompt compensation payments to oil spill claimants worldwide. Governments that belong to the International Oil Pollution Compensation (IOPC) Fund remain undecided whether to embark on revising the CLC/Fund regime. But in the event of revision there is a real danger that the international system could be fragmented, and that payment of future claims could be subject to long delays due to legal wrangling.

The impetus for revision has come from a handful of governments, supported by the oil companies. Although total compensation payments have historically been shared 50:50 over the years between shipping companies and oil receivers, the oil industry is concerned about having to contribute to a greater extent following the entry into force, in March 2005, of the optional Supplementary Fund, which has increased the maximum available compensation per spill in countries that choose to join to around $US 1 billion.

However, ICS believes that the potential effect of the new Supplementary Fund on the present split is offset by the 2003 increase in shipowner liability under CLC, and by the voluntary increase in the levels of the shipowners’ liability for small tankers in ‘third tier’ contracting states, known as ‘STOPIA’ (whereby the P&I Clubs have agreed to indemnify the IOPC Fund in respect of all claims up to SDR 20 million - over $US 30 million - where the shipowner’s liability would be lower).

Encouragingly, during the Assembly of the IOPC Fund in October 2004 a large number of governments voiced their objections to revising CLC/Fund. But in March 2005, an IOPC Fund Working Group meeting which was meant to make a firm recommendation proved inconclusive, so the matter will revert to the next IOPC Fund Assembly in October 2005.

A clear majority is needed for revision, which in view of the strong opposition would likely be a lengthy process, with the risk of breaking up the existing regime. Rather than insisting on reopening the Conventions it is greatly hoped that countries favouring revision will take a closer look at the voluntary industry agreements advanced by the P&I Clubs, with the full support of ICS. As an alternative to ‘STOPIA’ the Clubs have offered ‘TOPIA’, under which they would indemnify the Supplementary Fund in respect of 50% of any claims falling on it.

Whether the Conventions should be amended to address ship safety also remains highly contentious. The Clubs have proposed that an informal working group be established to consider a number of possible measures that could be taken by the Clubs, and other interests, to prevent sub-standard shipping from obtaining insurance, which has also been referred to the IOPC Fund Assembly.

In the meantime, the shipping industry continues to impress upon governments the importance of maintaining a broadly based international system that compensates victims promptly and efficiently. Reopening the Civil Liability and Fund Conventions would be unnecessary and counterproductive.

The European Union and its institutions, not least the European Commission and the European Parliament, are undoubtedly exerting a far greater influence upon international maritime regulatory affairs than ever before. In many respects the EU is a positive force for maritime safety and pollution prevention. But as EU policies have an increasing impact on global ship operations, ICS and ISF are having to develop new strategies to communicate with EU policy makers and politicians. They might not always choose to agree with the industry, but it is important for them to have an understanding of the likely consequences of their decisions.

In May 2004, a further 10 countries - including Cyprus, Malta, Poland and the Baltic States – joined the European Union, increasing EU registered tonnage to about a quarter of the world fleet or some 40% by beneficial ownership. In recent years, Europe has played a major role in controversial decisions made at IMO, twice forcing the amendment of the MARPOL Convention to accelerate the phase-out of single hull tankers as a consequence of its political response to the ‘Erika’ and ‘Prestige’ disasters (in 1999 and 2002). This has inevitably generated discomfort on the part of other governments, especially when they have been threatened with unilateral EU legislation that would have been at variance with IMO Conventions to which EU member states are party. More recently, as discussed elsewhere, ICS has been very concerned by EU proposals to criminalise genuine accidents, and about the pre-emption of discussions at IMO on atmospheric pollution by adopting regional requirements on fuel quality and emissions.

All regulatory discussion inevitably has some political dimension. But for the first three decades after IMO was established in 1958 most of its legislation was established on the technical merits of the arguments pertaining to safety and the environment. Such was the value placed on maintaining uniform maritime regulations that any amendments to Conventions had to fulfill agreed procedures to establish ‘compelling need’. The United States arguably eroded this tradition with the adoption in 1990 of its Oil Pollution Act (OPA 90). More recently however it has been the EU which has contributed so greatly to the growing politicisation of debates at IMO.

With the expansion of the EU, this influence at IMO can only be expected to increase. The new European Commissioner for Transport, Jacques Barrot, has already restated the Commission’s intention to speak at IMO on behalf of all 25 EU member states. In practical terms this process has already started, and the Commission’s eventual aim is that the EU should become a full member of IMO in its own right, although full membership is currently the privilege of United Nations members only, and the EU is not a sovereign state.

Another aspiration of the Commission is to negotiate on behalf of all EU states on the UN Law of the Sea Convention. Apart from the Commission’s interest in adjusting the balance of rights between flag states and coastal states, this is presumed to have significant economic and strategic implications that may be demonstrated by the EU’s announcement that it intends to develop a comprehensive maritime policy, covering everything from shipping to territorial rights. In so far as it affects shipping this major exercise will, it is hoped, amount to no more than a reiteration of the EU’s approach on shipping matters, but it may provide an opportunity for the industry to reiterate that a global industry needs global regulation.

The EU also has a growing impact on other maritime related fronts. In February 2006 the EU will co-ordinate the participation of EU nations at the ILO Maritime Conference on the new Consolidated Maritime Labour Convention. It already negotiates on trade issues, including maritime services, on behalf of all EU Member States at the WTO, as well as the current OECD negotiations on removing market distorting subsidies from shipbuilding. These are all activities in which ICS and ISF are involved, as are the proposals by the EU Competition Directorate to abolish liner shipping conferences and review anti-trust rules for other sectors, which are likely to have a profound impact on maritime competition rules globally.

Feeding the views of industry into EU thinking is something of a challenge, and the structure of the institutions in Brussels is complex. The European Commission is the equivalent of the civil service, but with far greater powers than national bureaucracies, having responsibility for initiating regulatory activity. The Council of Ministers brings together the 25 EU Member States, and is responsible for deliberating Commission proposals. The European Parliament comprises nationally elected representatives who form distinct political groupings but do not necessarily vote on national lines.

Historically the Parliament has been by far the weakest of the three components. But in recent times it has become more of a force, having full co-decision powers on transport issues including the right to reject proposals. While this may be good for democracy, from the industry’s point of view it is a mixed blessing. While it can help to curb the excesses of the Commission and put pressure on the Council of Ministers, it also means that lobbying efforts now need to be directed at three, rather than two, influential bodies. Moreover, the position that may be taken by MEPs, particularly on emotive issues such as protecting the environment, is perhaps less predictable than that of specialists working for the Commission.

ICS has always worked closely with the European Community Shipowners’ Associations (ECSA), which is the principal representative of the European industry in dealings with EU institutions, and whose member national shipowners’ associations also belong to ICS. However, today European activity tends to affect all ICS members, requiring ICS to make representations to the EU on its own behalf.

One new development in which ICS is involved (in co-operation with ECSA, Intertanko, BIMCO, and Intercargo) has been the establishment of a so called Intergroup on maritime affairs, in which Members of the European Parliament can be informed of industry viewpoints. If this helps to improve the quality of the dialogue between European politicians and the industry, and thus the decision making process, it will be to the benefit of all.

Shipping companies have primary responsibility for ensuring compliance with international maritime rules. But governments are responsible for enforcement, and there has been increasing concern about why some flag administrations appear to have a greater concentration of sub-standard shipping than others. Apart from the implications for safety and environmental protection, tolerance of sub-standard operators provides them with an unfair competitive advantage over the vast majority that are responsible shipping companies.

ICS and ISF have therefore welcomed the new IMO focus on addressing the issue of implementation and enforcement of IMO Conventions by its member states. While reinforcing the concept that rights also confer obligations, IMO has had to be attentive to the legitimate concerns of its member governments about preservation of sovereignty. The industry is therefore encouraged by the progress made towards developing what is to be called the IMO Member State Audit Scheme, whereby maritime administrations will be subject, on a voluntary basis, to some form of external audit by personnel from other member states, under the auspices of IMO.

The results of the audits will be used to identify areas for improvement, which in the case of developing countries might be targeted for IMO technical assistance programmes. Using criteria that will be based on an accompanying IMO Code on the Implementation of Mandatory Instruments – in whose development, by an IMO working group, ICS has been participating - the Scheme is due to be adopted at the IMO Assembly in November 2005. However, it has already been piloted by Cyprus, the Marshall Islands and the United Kingdom, and also France, Iran and Singapore, which have been auditing each other, with lessons learnt being fed into the Scheme’s development. ICS would welcome the eventual emergence of a mandatory scheme, though in practice a voluntary scheme should also prove effective: any responsible flag state should feel obliged to participate, not least because this is likely to be a factor in port state control targeting.

Meanwhile, as a complement to the IMO Scheme, the Round Table of international shipping associations, under ICS/ISF auspices, has updated the Flag State Performance Table which accompanies its Shipping Industry Guidelines on Flag State Performance. In March 2005, ICS was pleased to present the Guidelines to an IMO workshop on flag state implementation aimed at developing countries. In the course of 2005, the Guidelines will be reviewed to take account of comments made by governments, amongst whom they have generally been well received.

Notwithstanding this activity at IMO and the important work at ILO on the development of its international maritime labour Convention, the United Nations in New York has rekindled old discussions about the meaning of the requirement in the UN Law of the Sea Convention (UNCLOS) for flag states to have a ‘genuine link’ with the ships under their flag. This is an unproductive debate, kept alive principally by the ITF’s long outdated industrial relations campaign against so called ‘flags of convenience’. ICS participated in UN discussions in New York in June 2004 which led to a UN Assembly Resolution referring the issue to a group of UN agencies to be co-ordinated by IMO during 2005.

Distinctions between national and open registers are becoming increasingly blurred, and defining quality purely on this basis is unhelpful (as shown by the fact that Liberia, Bahamas and the Marshall Islands, three of the world’s largest flags, demonstrate performance on a par with the best traditional registers). Moreover the meaning of the ‘genuine link’ is clearly defined by IMO and ILO Conventions. Far more important is a flag state’s performance, not least in its execution of its international obligations.

An adjunct of flag state responsibility is port state control. In November 2004 ICS represented the industry Round Table at the second Ministerial Conference of the Paris and Tokyo MOUs on Port State Control in Vancouver. Most of the world’s governments and industry committed themselves to a ‘circle of responsibility’ to help eliminate the remaining small minority of sub-standard ship operators.

ICS has welcomed efforts to improve PSC targeting, such as the Paris MOU’s recent decision to move away from its 25% annual inspection target for national authorities, and to reward quality operators with fewer inspections. But ICS continues to press for greater harmonisation between the world’s regional port state control authorities, believing that this can help to improve the targeting process.

Closely related to flag state responsibility is the role of the classification societies. About half of their maritime survey work (excluding ship construction) is made up of statutory inspections of ships and their equipment on behalf of flag states. The remainder is largely classification work for the shipowner, a class notation being necessary to obtain insurance.

In addition to members of the International Association of Classification Societies (IACS) there are perhaps half a dozen other classification societies that are presumed to comply with IMO requirements. But there are no published data available on whether these smaller class societies conduct their important safety and pollution prevention functions in full accordance with IMO standards, and a handful of flag states appoint some virtually unknown ‘Recognized Organizations’ that are not members of IACS.

In Europe, the European Maritime Safety Agency (EMSA) is in the process of approving classification societies that survey EU member state ships. There has also been talk of proposals to impose financial liabilities on classification societies for ships involved with casualties. There is understandable concern about the prospect of Class being exposed to potentially unlimited liabilities, but there may be a case for an international limited liability regime governing Class, similar to the IMO liability regimes that apply to shipowners.

Early in 2005 the European Commission made further dramatic proposals that could have a major impact on how classification societies conduct their business. The Commission is questioning whether the dual role of class, acting on behalf of the flag state for statutory survey work and the shipowner with respect to classification surveys, gives rise to a conflict of interest. The Commission is suggesting that the conduct of such surveys should be separated, perhaps even being undertaken by different societies. Apart from the loss of safety and commercial benefits derived from ship surveys that take both functions into account, ICS is not at all persuaded that the perception of a potential conflict of interest is borne out by reality. In discussions with the Commission, including an industry ‘consultation meeting’ in February 2005, ICS and the rest of the industry therefore strongly questioned this premise.

All flag states have an essential role in helping to ensure that Class continues to perform its critical tasks in conformity with IMO standards. But ICS remains optimistic that Europe can be persuaded not to pursue the question of joint functions, and to explore, instead, more productive areas for overseeing Class such as auditing performance.

In 2003, Bahamas and Greece presented IMO with the radical proposal that IMO itself should take responsibility for setting goal based standards for future newbuildings - i.e. safety and environmental performance objectives for new ships which until now have been determined largely by classification societies. In December 2004 the IMO Maritime Safety Committee advanced its debate on this subject considerably, and ICS participated closely.

Initially there had been concern on the part of the classification societies that governments might take over functions that are currently the preserve of the societies themselves. These misunderstandings have now been largely clarified, though the debate about how exactly goal based standards are to be defined has some way to run. What is critical to the shipowner is that his ships are built ‘fit for purpose’, capable of transporting cargo safely throughout the life of the ship.

To that end, ICS believes that the high level goals adopted by IMO can be expected to include, though may not be limited to, design life, environmental considerations, structural strength, means of access for inspection, and quality of construction. Within these constraints the classification societies might properly be expected to be responsible for such matters as structural strength and corrosion addition, as well as the verification criteria for these parameters at the design, construction and operational phases of the ship’s life. These important discussions will continue through 2005 and it may be some time yet before this work is complete.

A separate but related exercise to the development of IMO goal based standards is the major IACS project to develop common structural rules, initially for bulk carriers and tankers. In 2004, ICS sent detailed comments to IACS and was pleased that it agreed to delay finalising proposals in order to take account of the 3,000 separate comments submitted by industry. The issues are complex, and while there is consensus about the need to improve the robustness of ships, there is a variety of views about what precisely this might entail, not least in terms of extra steel, and standards for hull coatings.

The classification societies still have an ambitious target date for implementing the new common rules by January 2006, and it is important that they take full account of subsequent industry comments. A major considertion will be the need to preserve a cohesive IACS at a time when there will be inevitable differences of approach between the societies themselves.

Tripartite discussions on shipbuilding standards - between shipowners’ organisations, shipyards and classification societies - were only established as recently as 2002, but are now a regular event. To some extent, the discussions in Yokohama, in November 2004, in which ICS participated, were dominated by consideration of the IACS common rules and IMO goal based standards. However, industry remains interested in taking forward a broader debate on improving the relationship between builders, owners and Class, and the discussions have already generated a welcome degree of mutual trust.

The introduction of the International Safety Management (ISM) Code has brought a fresh commitment to the concept of continuous improvement of the safety record and environmental performance of shipping companies. All incidents are regarded as preventable, and the target of any responsible company that has implemented a genuine ‘safety culture’ is zero incidents involving injury, pollution or damage.

IMO has commenced a review of the effectiveness of the ISM Code and its impact on safety and pollution prevention since its mandatory introduction for tankers, passenger ships and bulk carriers in 1998, and other ships in 2002. In November 2004, ICS chaired the first of a planned series of IMO meetings of industry experts with practical experience of ISM, which will report to the IMO Secretary General at the end of 2005.

It remains to be seen what the eventual outcome of the IMO review will be. Recent safety and pollution statistics appear to demonstrate a steady improvement in the industry’s performance, especially since ISM first came into force for ‘phase I’ ships. However, the classification societies - which are responsible for the conduct of many external audits of ships and companies required by ISM – have already proposed amendments to the Code. Although consideration of these has been deferred by IMO, it is possible that the review will lead to further regulatory changes.

Many ship operators had applied the principles of safety management long before the ISM Code was heard of, as demonstrated by the ICS/ISF Code of Good Management Practice produced, with no claim to originality, almost 25 years ago, advocating a ‘culture of self regulation of safety’. ISM was therefore essentially a codification of existing best practice, with the addition of external auditing and a licensing system. However, there have been inevitable questions about the effectiveness of the ISM Code, the extent to which it has been properly enforced, or brought about universal improvements. In the margins of the industry there have been accusations that Safety Management Systems can be bought ‘off the shelf’, and that by simply ticking boxes it has been possible to comply with the letter of the Code rather than its spirit.

It is expected that the IMO review will touch upon these issues. Whatever is decided, it will be important to ensure that companies able to demonstrate that they have taken their ISM Code responsibilities seriously are not penalised with more inspections or paper work.

The ISM Code already extends to pollution prevention procedures and the elimination of actions or incidents that could lead to ship source pollution.

Ships are also required to carry a Shipboard Oil Pollution Emergency Plan (SOPEP) to mitigate the effects of environmental damage in the event of a pollution incident.

Since the adoption of the IMO MARPOL Convention the quantity of oil split through shipping incidents has reduced from 608,000 tonnes in 1979 to 15,000 in 2004 (admittedly an especially ‘good’ year). But despite constant technical improvements and modifications to procedures, physical risk still exists at sea, and there are complex calculations that go into the design, construction, operation and maintenance of ships where human error can still intrude. So long as goods are transported by sea then incidents involving oil spills will occasionally happen.

It is distressing when wildlife suffers as the result of pollution, and enormously disruptive to coastal communities affected by a large spill. But on the more positive side, it is clear that nature has a remarkable ability to heal itself, as demonstrated by the recovery of the marine environment following the immense pollution from oil terminals during the first Gulf War. Furthermore claimants are normally fully compensated for any financial losses (e.g. to fishing and tourism) through the international compensation regime, as is the government of the affected coastal state for the cost of any clean-up operation. Payments are made regardless of fault and thus without undue delay.

A long sought development is the well advanced effort for coastal states to provide so called ‘places of refuge’ for ships that get into difficulty. The worst pollution is often caused when a ship breaks up at sea, as the ‘Prestige’ incident off the coast of Spain bears witness. However, measures such as legislation criminalising accidents in territorial waters, or the unwelcome Spanish decree, adopted in 2004, requiring ships seeking refuge to agree to pay financial guarantees in excess of internationally agreed limits, have hardly contributed to progress in this area.

But looking further ahead, serious thought is now being given to developing ships that have a neutral overall impact on the environment and are thus environmentally sustainable. Apart from improvements in engine efficiency, which have drastically reduced operational pollution, several recent developments should greatly help towards this goal.

As expanded on below, May 2005 saw the entry into force of MARPOL Annex VI which addresses atmospheric pollution by ships, in accord with broad scientific opinion about what is necessary to reduce emissions that may contribute to greenhouse gas emissions or damage to local environments.

In February 2004, IMO adopted the International Convention on Management of Ballast Water and Sediments in order to eradicate the unwitting export via ships’ ballast water of unwelcome marine micro-organisms that can damage local ecosystems elsewhere. ICS has since participated in the development of guidance by IMO on the implementation of the new regulations. The Convention was adopted under intense political pressure, and as a result left many questions unanswered about the technology that must be used to address the threat of invasive species. ICS therefore hopes that the IMO guidelines will bring clarity to requirements that will have to be implemented on ships once the Convention enters into force, possibly in the next two years. Their publication will also allow ICS and Intertanko to amend their existing Model Ballast Water Management Plan and prepare guidance to ship operators on compliance.

It is a feature of shipping, with its international regulatory machinery, that it is a relatively easy industry to which to apply global environmental rules. But by the same token policy makers should take account of the industry’s proportionately small global contribution to pollution in comparison to other sources, and that movement of cargo to other forms of transport would increase pollution overall.

In May 2005 the new MARPOL Protocol on Atmospheric Pollution from Ships entered into force. Most ships already comply with the main fuel quality and emission requirements established by MARPOL Annex VI. But they will also have to comply with a lower 1.5% sulphur fuel content caps in the Special Emission Control Areas (SECA) of the Baltic Sea, from May 2006, and in the North Sea sometime during 2007, plus any other SECAs that may be established subsequently.

It had been understood that oil companies would be ready to supply adequate bunkers of the required standard for SECAs, but it is possible there may be teething problems, particularly where it is necessary for owners to carry two grades of fuel. The fact that IMO is still finalising guidance concerning the acceptance of IACS Unified Interpretations for MARPOL Annex VI has also been a concern to ICS.

The main significance of the Protocol entering into force, however, is that work can now commence on reviewing it again to explore the possibility of further improvements on a globally uniform basis, if that is what objective scientific advice now requires.

ICS is therefore disappointed that the European Union is expected to pre-empt discussions at IMO by adopting a Directive which may require ships at berth in port areas to burn fuel with a sulphur content of only 0.1% by 2010. More encouragingly, most of the other EU requirements appear likely to be broadly in line with MARPOL, subject to the approval by IMO of further Special Emission Control Areas. Industry has also welcomed the EU’s willingness to consider alternatives to the ‘at berth’ fuel quality standards

The fact nonetheless remains that if the EU adopts its new standards before IMO, this sends a poor signal to other national authorities that might be tempted to adopt their own unilateral requirements and apply these to visiting ships. Moreover, complaints by the European Parliament about the time taken for the IMO rules to enter into force have a certain irony given that many EU member states have still not ratified MARPOL Annex VI themselves.

In January 2005, ICS joined forces with Intertanko, the Oil Companies International Marine Forum (OCIMF) and other industry bodies to establish a major international working group on tanker safety, following a number of recent fire and explosion incidents on chemical and product carriers. During 2004 there were at least five such incidents and 26 deaths. A distinguishing feature is that they appear to have involved explosions and fires in the cargo tanks or cargo tank area.

The formation of the group was given impetus by discussions in December 2004 at the IMO Maritime Safety Committee. These were prompted by France in the wake of an explosion on board the tanker ‘Chassiron’ in 2003, and its proposal that fitting of inert gas should be considered on tankers of less than 20,000 dwt. In a welcome move, IMO agreed to await the outcome of the industry’s initiative, and any resulting recommendations, before deciding how best to address this serious issue. ICS has been asked to make a progress report to IMO in May 2005 on behalf of the industry, and will continue to provide information at appropriate intervals until this urgent work is complete.

More generally, ICS has welcomed consideration by IMO of the need to clarify when a casualty is serious enough for flag states to submit investigation reports to IMO, given that the requirements in the Safety of Life at Sea Convention (SOLAS) are possibly too vague. In what appears to be a welcome move, the European Commission is also expected to pick up on this issue, at least in so far as it affects EU Member States, as part of its Third Maritime Safety Package. It is simply unacceptable that some major ship registers rarely bother to file any accident investigation reports, despite the clear obligations on them to do so.

ICS is centrally involved in efforts to address concerns about conditions in ship recycling yards, principally located in Asia. In the process of recycling ships that have reached the end of their working life, virtually nothing goes to waste. It is undoubtedly a ‘green industry’ and employs a large, if predominantly unskilled, work force. But while the principles of ship recycling may be sound, the working practices and environmental standards in the yards often leave much to be desired.

Ultimate responsibility for conditions in the yards must lie with the countries where they are situated. However, the shipping industry has accepted it has a responsibility to do what it can to minimise potential problems, as shown by the Industry Code of Practice on Ship Recycling, produced in 2001 by a coalition of shipowner organisations and trade unions.

ICS and the Round Table shipowner organisations have had to refute misleading Greenpeace statements that the Basel Convention on Transboundary Movement of Hazardous Wastes covers the movement of ships to recycling yards. ICS attended the meeting of Parties to Basel, held in Geneva in October 2004, at which conditions in ship recycling yards were discussed but at which no such decision was taken. ICS has also maintained its position that placing responsibility for the conditions in the yards themselves directly upon shipowners is neither reasonable nor practical. However, ICS remains confident that governments will concur with the shipping industry that IMO is the appropriate forum for addressing the safety questions surrounding ship decommissioning.

Following a tripartite IMO/ILO/Basel Convention working group held in January 2005, IMO, with full support from industry, is working on the identification of issues that may be suitable for mandatory application on a global basis. These issues are already largely covered by existing industry guidance, such as delivering ships ‘gas free’, and the need for shipowners to complete an inventory of hazardous substances on board ship before they arrive at the recycling yard. In addition ICS is committed to the concept of the ‘green passport’ which would provide information about any potentially hazardous materials used in the construction of newly built ships. ICS also believes that the idea of approved ship recycling yards would also be very useful to the shipping industry in ensuring the responsible disposal of redundant tonnage.

ISF is committed to the provision of decent working conditions for seafarers as demonstrated by its Guidelines on Good Employment Practice. However, to a large extent the ISF Guidelines are based on the patchwork of existing ILO maritime standards, which have enjoyed varying degrees of enforcement around the world. For the last five years, and with the firm backing of its membership, ISF has therefore dedicated much of its resources to a major exercise - the development by the International Labour Organization (ILO) of a Consolidated Maritime Labour Standards Convention.

This so called ‘super convention’ will consolidate and update the 60 plus existing ILO maritime conventions and recommendations into a single, simpler instrument. This should be easier for governments to ratify and enforce, providing a common understanding and sound employment standards that both ship operators and seafarers require. ISF is responsible for co-ordinating the views of maritime employers at the tripartite ILO, and is closely engaged in the final negotiations on the text. Likewise the International Transport Workers’ Federation (ITF) co-ordinates seafarers’ trade unions. A final diplomatic conference in Geneva is scheduled to adopt the Convention in February 2006.

The provisional text of much of the Convention was discussed at an ILO Preparatory Maritime Conference in September 2004. Despite minor dramas (with the seafarers in effect staging a ‘walk out’ during a section of the proceedings) steady progress was made towards producing a text similar in concept to the IMO STCW Convention, with both mandatory regulations and recommendatory guidance. This will cover such areas as conditions of employment, hours of work, food and catering, and accommodation at sea. It is anticipated that ships will be issued with some form of labour certificate by their flag state, confirming that employment standards comply with ILO requirements, and which will be subject to port state control inspection.

The final tripartite negotiations will be challenging, with agreement on who exactly should be defined as a ‘seafarer’ for the purposes of the convention a particularly difficult issue. However, ISF is very conscious of the need to produce a convention that will be acceptable to governments and which they will be able to ratify. An idealistic document which simply sits in a pending tray would be testimony to six wasted years.

A problem which arose with some previous ILO maritime instruments is that they were perceived to be the products of deals between employers and unions, in which government concerns about administrative practicalities were not always adequately addressed. Encouragingly, most governments with a major maritime interest have taken an active part in the discussions in Geneva. They have endeavoured to co-ordinate their positions to a much greater extent than for previous ILO maritime issues, and the hope must be that they will feel that they ‘own’ the new Convention.

An additional tripartite meeting has taken place in April 2005 as this report is being printed, preparing the ground for the 2006 Conference. Looking ahead, and assuming that a workable package is adopted, ISF will assist in advising industry about ensuring compliance with the Convention, the hope being that it will come to be regarded in the same light as core IMO Conventions such as SOLAS, MARPOL and STCW.

One specific issue which the new Convention is expected to address is the repatriation of seafarers. In normal circumstances, of course, this is the clear responsibility of employers. Nevertheless, ISF believes that flag states should institute arrangements to ensure that in the event of normal procedures failing (e.g. due to bankruptcy) seafarers working on ships using their flag are repatriated to their country of residence. In the meantime, ISF has continued to participate in a joint IMO/ILO working group on this issue, which led to the establishment by ILO of a database of abandonment cases. But of the 20 or so cases listed, many have been resolved with help from ISF and ITF, or else involve fishing vessels which are a different industry.

In 1995 IMO adopted radical amendments to the International Convention on Standards of Training, Certification and Watchkeeping for Seafarers (STCW). It was in fact ISF that originally requested IMO to revise the 1978 STCW Convention in light of concerns about competence standards amongst certain nationalities of crew, especially from labour supply countries that had emerged in the 1980s. Ten years on it seems fitting to examine the extent to which ‘STCW 95’ has fulfilled its objective of restoring confidence in seafarers’ certificates, regardless of the country of issue.

STCW has succeeded in reinforcing the principle that all maritime administrations have responsibilities for the approval and maintenance of training standards, and the issue of STCW certificates to competent seafarers. In addition to certificate-issuing nations, this principle now equally applies to flag states with regard to seafarers trained in another country but permitted to serve on their ships. This is fundamental since the majority of the world’s seafarers today serve on ships whose nationality is different from their own.

The new requirement in STCW, whereby administrations had to submit reports about the measures they have taken to ensure international training standards were being met, led to the publication in 2000 of the first IMO ‘white list’ of countries deemed to be in compliance with STCW. The fact that virtually all countries that submitted information to IMO achieved a place on the ‘white list’ attracted criticism from some quarters, including some seafarers’ unions. Nevertheless, having compiled the required information some 100 countries have demonstrated that they wish to be seen to be taking the implementation of STCW seriously.

However, a clearer indication of whether improvements have actually been made to competence standards amongst newly qualified seafarers from developing countries may be available when IMO publishes its evaluations of national quality standards reports, possibly during 2006. Governments are meant to identify deficiencies in training institutes and any corrective actions. The first of these reports were only required to be submitted to IMO in 2004, so the last of the Convention’s many control mechanisms is still being implemented. This long transitional period makes it premature to assess fully the extent to which the 1995 amendments have been a success.

There have been widespread improvements in terms of equipment and infrastructure, with the industry putting millions of dollars into training. The Philippines, for example, now has what outside observers have described as one of the best equipped training institutes in the world. But there are anecdotal reports that all is not yet perfect in every training college, despite approval by administrations.

IMO is likely to conduct a review of the competence standards required by support level ratings in order to be certificated as watchkeepers. This is due to an agreement at ILO, during 2004, that IMO will take over responsibility for determining the competence standards for the grade of Able Seaman (AB), currently regulated by the ILO Certification of Able Seamen Convention, 1946 (ILO 74), but which has been superseded by the IMO STCW Convention.

The grade of ‘Able Seaman’ is significant, especially to unions, since it is referred to as a benchmark in many wage agreements. However, the grade is not used in the STCW Convention, which instead stipulates training standards for what it describes as ‘support level watchkeepers’. ISF believes that with a few minor adjustments to the STCW Code, it should be possible to clarify the competence standards of an ‘AB’, and that this can be achieved without the need to reopen all rating competence standards. The ITF, however, would prefer a wholesale review of all rating training requirements contained in STCW.

Although the 1995 amendments to STCW only fully took effect in 2002, governments continue to suggest other minor amendments to some of its provisions. Norway, for instance, has been keen to extend mandatory requirements for shore based refresher training. While certain training, such as practical fire fighting, can only be updated on shore, ISF believes that continuing competence in most aspects of basic training can best be demonstrated by seagoing service and evidence of participation in drills. While open to suggestions for improvements, ISF remains sceptical about constant changes to detailed rules, unless of demonstrable value.

ISF is also maintaining a close watch on efforts by non-governmental organisations to establish training standards and ‘certificates’ outside the framework of STCW. While there is clearly a place for training over and above that mandated by international rules, ISF wishes to avoid any confusion between what might be recommended as desirable and what is actually required by IMO.

Another important issue has prompted ICS to seek a reinterpretation of a regulation in SOLAS that is resulting in accidents to seafarers and grave risks of fatalities. ICS has had difficulty in persuading IMO governments to accept that regular testing of fully manned free fall lifeboats, dropping seafarers into water from heights of up to 20m, is both dangerous and unnecessary. But discussions will continue during 2005.

The issues of adequate safe manning levels on board ship and the prevention of tiredness or fatigue amongst seafarers have become inextricably linked, and are expected to receive increased attention at IMO during 2005.

Manning levels reduced drastically up until the 1990s as new equipment was introduced and shipboard efficiencies increased. But this appeared to be followed by growing appreciation of the benefits of improved maintenance derived from manning levels over and above those strictly required to ensure the safe operation of the ship in line with the IMO requirements contained in Resolution A.890 on minimum manning levels.

The IMO Safe Manning Guidelines were last revised in 1999, and reflect the need to ensure compliance with international work hour regulations contained in the revised STCW Convention and the ILO Convention on Seafarers’ Hours of Work and the Manning of Ships (ILO 180). Following the introduction of both the ISM Code and the ISPS Code there has been concern about the increased workload on seafarers, not least the paper work, created by these additional requirements, although the IMO Safe Manning Guidelines have already been amended to cover this. IMO has also adopted guidelines on the prevention of fatigue, to which industry contributed.

It has been argued that if manning levels are insufficient, and likely to contribute to fatigue, this should affect compliance with work hour requirements, which now have to be demonstrated through mandatory maintenance of work hour records for individual seafarers. In other words, to ensure compliance with work hour regulations, which is now being checked by port state control inspectors, unsafe manning levels should be corrected automatically.

Others, however, question this contention, and suspect that there may be undue competition between certain flag states to approve manning levels that are too low. What is clear is that in a number of cases where fatigue has been cited as a cause of a casualty or injury, there has been non-compliance with existing regulations, whether with regard to solo watchkeeping at night or violations of work hour rules. ISF will listen carefully to the debate at IMO, but there needs to be careful consideration of the value of reviewing safe manning rules rather than focusing on proper enforcement of existing regulations.

Related to all these issues is seafarer supply and demand. A number of companies are expressing concerns about shortages of certain grades, particularly senior engineers, or on ships such as gas carriers which require special qualifications. ISF and BIMCO, in conjunction with the Institute for Employment Research at Warwick University, are currently compiling the latest five yearly update of the global supply and demand situation, which will include predictions on the future demand/supply balance. This important report should be ready for publication in late 2005.

As the international employers’ organisation for shipping companies, ISF takes a keen interest in seafarers’ wage rates and produces an annual wages survey distributed via national shipowners’ associations. In 2004 – 2005, wage trends have been heavily influenced by the decline of the dollar, the currency in which many seafarers’ salaries are paid or calculated. But exchange rates aside, it appears that officer wages are rising, with anecdotal reports of substantial salaries being paid to senior officers in trades where specially trained crew are in short supply.

For the future, supply shortages combined with buoyant demand for shipping services might be expected to increase wage pressures, particularly for officers. Possibly these will be exacerbated by pressure to increase manning levels, to cope with additional burdens such as compliance with the new ISPS Code.

ISF plays no part in collective bargaining negotiations with seafarers’ trade unions, but it is responsible for discussing periodic increases to the ILO Minimum Wage for Seafarers. It does this as one of the two members of the ILO Joint Maritime Commission, the other being the ITF. In January 2005, the ILO minimum increased to US $500 basic pay a month for an Able Seaman. In practice, with overtime and leave payments, the actual wage of an ‘AB’ on the ILO minimum is far more than the shore based wage rates that would be available for comparable work in developing countries. Although the ILO minimum wage is only a recommendation, and there are exceptions for developing countries employing nationals on their national flag ships, the shipping industry is unique in that it is the only industry for which a global minimum wage has been agreed.

Two thirds of seafarers come from developing countries and yet the wages received by many are far higher than the ILO minimum. On many open register ships wages are set through negotiations with ITF or their national union affiliates (without so called blue or green certificates issued by ITF, ships under ITF designated ‘flags of convenience’ can be subject to boycott action by ITF dock worker affiliates). Following the establishment of the International Bargaining Forum (IBF) which now involves ITF, the International Maritime Employers’ Committee (IMEC), the International Mariners Management Association of Japan plus several national shipowner associations, the wage rates for seafarers on "foc" ships operated by these employers are subject to negotiation rather than imposed unilaterally by ITF. An interesting aspect of the new IBF agreement is that those employers party to it have negotiated a reduction in the ‘voluntary’ welfare contributions required to be made to ITF. It is assumed that similar reductions may be negotiated by other employers. The IBF agreement is due for revision in 2005.

Employers are also following closely the efforts of the Employment Directorate of the European Commission to insist that seafarers from the new EU member states are paid the same wage rates on board the ship of another EU flag as nationals of the vessel’s flag state. This is contrary to the principle, established by ILO Conventions, that wage rates should relate to a seafarer’s country of residence, and is based on an erroneous assumption that working on board an internationally trading ship is equivalent to living in the territory of the flag state. The consequence of the EU pursuing this line is likely to be more employment by European operators of seafarers from outside the EU, or even the transfer of European ships to non-EU flags.

On 1 July 2004 the deadline came and went for the implementation of the IMO International Ship and Port Facility Security (ISPS) Code, developed in response to concerns about the potential for ships to be used by terrorists in the wake of the 2001 attacks on the United States. Meanwhile, ICS and ISF have remained active in a number of international fora at which maritime security remains high on the agenda.

Whether the world is a safer place as a result of ISPS is not a question which ship operators can answer, though there have been concerns about the extent of compliance by certain ports. However, the vast majority of the world fleet has done what was required with regard to the development of Ship Security Plans and securing the necessary approval to be issued with a Ship Security Certificate. Inevitably there have been a few teething problems with regard to enforcement by over zealous port state control inspectors. But as a result of industry feedback, co-ordinated by ICS and the Round Table associations, many problems have been resolved following discussion at IMO and with individual administrations, not least the US Coast Guard. It is hoped that certain outstanding issues, such as the refusal of some visiting officials to wear identification badges, will be addressed during 2005 by the production of IMO guidelines on boarding procedures in the port area.

In response to industry proposals, IMO agreed in December 2004 to a common international format for the submission of security related information to ports prior to arrival. It is disappointing that this information must still be sent in a separate message from non-security related data which is already routinely submitted, unnecessarily increasing the workload for ships’ crews.

Meanwhile, the United States is pushing ahead with its desire for long range identification and tracking of ships to address security concerns. ICS continues to favour the development of IMO rules on long range tracking, the avoidance of new carriage requirements and the use of existing INMARSAT C units. ICS has also underlined the principle, accepted by IMO, that any new system should be at no cost to industry, and that data transmitted should be confined to ship identity, position and time of report. Perhaps unfortunately, it now appears that the development of IMO rules may take longer than previously anticipated, and the US may require ships trading in its vicinity to use its AMVER reporting system as an interim measure. However, the need to develop long range tracking in an international arena, and to accord the data appropriate protection, remain key principles which ICS will seek to uphold.

Also at IMO, ICS/ISF have joined forces with ITF during discussions on the revision of the SUA Convention (1988 Convention on the Suppression of Unlawful Acts Against the Safety of Marine Navigation) and its Protocol, which has also been prompted by the United States. Industry and unions have been keen to prevent the erosion of shipowners’ and seafarers’ rights in connection with the possible boarding of ships on the high seas, and the criminalisation of companies and seafarers for the unwitting transport of weapons of mass destruction. While a number of safeguards have been agreed, it will be important to ensure that all matters of principle are satisfactorily resolved at the IMO Diplomatic Conference in October 2005.

ICS has also continued to play an active role in discussions at the World Customs Organisation on means of improving security in the wider transport supply chain. However, efforts to develop multilateral security procedures that are compatible with the facilitation of maritime trade have encountered difficulties. In 2004, US Customs expressed high level concern that the proposals, developed by a special WCO task force over a two year period, leaned too much towards trade as opposed to security, and as a result the WCO work is expected to be recast. While this is disappointing, claims about the ‘death of trade facilitation’ are premature. With strong ICS and BIMCO support, IMO has rethought plans to cut back on the work of its Facilitation Committee, in which ICS will continue to contribute to discussions on removing red tape.

Sadly, it must also be reported that industry’s compliance with ISPS, and its co-operation with various other security measures, has so far seen too little reciprocal effort by governments with regard to eliminating the scourge of maritime piracy, which often involves armed attacks on ships underway. With full support from ICS, IMO is planning to hold high level discussions on security in the Malacca and Singapore Straits (one of the worlds’ major sea lanes) in the second half of 2005. But the political will amongst those governments best positioned to tackle this problem seriously is only slowly appearing.

The adoption of the ISPS Code has conferred a special role on seafarers in the pursuit of the greater security now demanded by governments. Every ship has had to appoint a crew member as a Ship Security Officer (SSO), and most crew members have had their workload augmented by responsibilities determined by the Ship Security Plan required by ISPS. An essential objective of ICS and ISF has therefore been to ensure that new shipboard security tasks should not involve seafarers becoming ‘security professionals’, required to take on responsibilities that should properly be performed by governments.

Manning implications are discussed elsewhere in this review. But rather impressively, given the limited 18 months notice, the industry successfully trained some 80,000 SSOs before the ISPS Code implementation deadline in July 2004, using the criteria in the Code, and guidance produced by bodies such as ICS, as the basis. Most companies appointed senior officers to the role. However, IMO is now considering the incorporation of training requirements for SSOs into the STCW Convention. ISF is therefore working hard to ensure that the standards and means of training delivery adopted in the existing IMO Model Course for SSOs will form the basis of the new requirements.

It may prove helpful to clarify what is required and what is not. But it is important that unnecessary additional burdens are not created for seafarers who have been serving as SSOs since July 2004. In this regard, ICS has been involved in preliminary discussions with IACS and others about the possibility of linking ISM and ISPS Code audits together, to reduce the paper work burden for seafarers.

Against this background of the special role of seafarers, ISF and ICS have been disappointed with the lack of progress on removing restrictions on shore leave and the movement of seafarers that have been a feature of the security landscape since 9/11.

At the specific request of the United States, and using an unprecedented fast track procedure that required the full co-operation of industry (co-ordinated by ISF) and trade unions (co-ordinated by ITF), the international community adopted a new ILO Convention on Security of Seafarers’ Identity Documents (ILO 185) in June 2003. The new Convention requires seafarers’ identity documents to include a bar-coded fingerprint, and sets out detailed procedures

for their issue. However, it also requires port states to afford special treatment to seafarers for the purpose of facilitating shore leave and crew transits, such that they should not normally be required to obtain visas at foreign consulates outside the country they are visiting.

Unfortunately, the United States has so far given little indication that it plans to implement the new ILO requirements. On the contrary it has confirmed its abolition of crew list visas - which alleviated some of the practical difficulties created by the US insistence that visiting seafarers require visas - and introduced a requirement for personal interviews at foreign consulates. Moreover, despite initial support from the European Commission, it appears that enthusiasm for implementing the new ID cards on the part of EU member states is wavering, despite their previous agreement at ILO. This is unfortunate, particularly given the progress made during 2004 by ILO and the International Standards Organization in developing detailed technical specifications for production of the new ID.

The issue is of course complicated by its political dimensions. Despite sympathy for the industry’s position from the IMO Secretary General and from quarters within the US such as MARAD and the Coast Guard, decisions are ultimately in the hands of those responsible for security and immigration. Nevertheless, on the occasion of IMO World Maritime Day in September 2004, ISF/ICS, ITF and other shipping organisations joined together to convey the industry’s serious concerns to the then US Secretary of State, Colin Powell.

The outcome of the US Presidential election suggests there will be little immediate shift in policy. But the industry will continue to emphasise that measures such as the denial of shore leave, and placement of ships under armed guard, are counterproductive to security objectives, and simply serve to alienate those with an important security role to play.

Under the banner of the United Nations Commission on International Trade Law (UNCITRAL) negotiations are taking place on a new legal instrument on liability for carriage of goods, to replace the Hague Visby and Hamburg Rules. ICS has taken an active part in the discussions and believes it is important to use this opportunity to establish international uniformity of regulations that will take account of modern developments such as door–to-door intermodal transport and electronic commerce.

It remains to be seen whether an instrument will be developed which will enjoy the broad support of governments and industry worldwide, and it may still go the way of the Hamburg Rules which have not gained universal acceptance. ICS remains committed to achieving an appropriate balance of risk between carriers and cargo interests. But the issues are complicated, and ICS was frustrated by some of the decisions at the latest rounds of discussion, held in Vienna in December 2004 and New York in April 2005, which were arguably not helped by the conspicuous absence of some major governments.

Meanwhile, as predicted, the 2002 Protocol to the Athens Convention, which substantially raises compensation available following a passenger ship casualty, is creating anxiety for ship operators due to the high level of cover required and the lack of a complete defence for terrorism. ICS is hopeful that these matters will be resolved before the Protocol enters into force, possibly in 2006, because they will hinder implementation.

To resolve these issues, ICS has proposed to IMO that governments should use the Vienna Convention on the Law of Treaties to clarify that acts of war etc also include acts of terrorism, and that in the absence of available insurance cover governments might apply the limits in the 1996 LLMC Convention. The industry thinks this a pragmatic solution but not all governments seem to agree.

Meanwhile, the Protection and Indemnity (P&I) Clubs, which are mutually owned by shipping companies to provide them with third party liability insurance, have been placed under increasing external scrutiny. In part this is due to discussions about the Civil Liability and Fund Conventions – to which the Clubs have responded by explaining how they avoid extending cover to sub-standard shipping - but also because of a report on marine insurance produced by the OECD, which suggested a number of means by which this might be achieved. The role of the P&I Clubs was also a topic at the joint meetings of executive committees of the Round Table of international shipping associations, held in London in October 2004.

The focus on the Clubs’ role in enhancing standards has led to renewed calls for compulsory liability insurance. Although this is a principle already established by several international Conventions applying to specific liabilities, the difficulty is to determine exactly what other liabilities should be covered, together with the problem of determining the reliability of cover by other than well known insurers such as members of the International Group of P&I Clubs. The European

Commission is looking at these questions and the possibility of only allowing the use of approved insurers.

As explained below, shipping should benefit from the further liberalisation of world trade that may follow the conclusion of a new agreement by the World Trade Organization. But even if the WTO discussions on maritime services are successful, there will still be a need for government maritime policy makers to meet in order to discuss maritime trade issues.

For several decades a forum for such discussion has been provided by the Organisation for Economic Co-operation and Development (OECD) Maritime Transport Committee (MTC). However, it has now had most of its necessary financial support withdrawn and, although it may hold further low key meetings, there is a strong possibility that it will be disbanded completely.

ICS had been concerned by the MTC’s recent lack of direction, but nonetheless it has contributed significantly to maritime trade liberalisation since its establishment some 40 years ago. The end of the MTC might be seen to reflect the decreased sense of political and economic importance with which shipping is viewed by governments, but it is also perhaps a sign that reliable and efficient shipping services are now largely taken for granted.

It remains to be seen what other global forum will emerge to enable senior maritime policy makers to exchange information about commercial and maritime trade issues, and reiterate existing free trade principles, should the need arise. One possibility, already being discussed amongst OECD maritime administrations, is the formation of a more informal grouping along the lines of the existing Consultative Shipping Group (CSG), which currently involves the governments of Europe, Japan and the United States, and in which ICS also participates. The very informality of the CSG may be an attraction at a time when the OECD committee has dropped from favour.

Of significant relevance to shipping’s fortunes are the negotiations at the World Trade Organization (WTO) in Geneva on eliminating trade discrimination and unfair treatment by governments. The rapid expansion of Chinese trade, which has partially fueled the boom in many shipping sectors, following its entry into the WTO, is not coincidental. A successful new WTO agreement on goods and products should further increase world trade and so generate demand for shipping services.

But shipping companies and their customers also stand to benefit from any specific terms that are agreed on maritime services as part of the current ‘Doha’ round of negotiations on a new General Agreement on Trade in Services (GATS). Currently shipping remains one of the few major industries (along with aviation) still outside the scope of the existing agreement concluded in the 1990s, largely because it is already very liberalised in terms of freedom to trade, as well as extensively regulated at a global level.

The principal benefits to ship operators of the incorporation of maritime services into any new WTO agreement are that it will codify existing best practices. This should help to prevent any return to unacceptable measures, such as widespread cargo reservation for national operators on international voyages or discrimination with regard to charges for port services. It should also help to eliminate them in those places where they persist. In addition, there is the possibility of new gains, especially for container lines, with regard to the movement of feeder cargoes and empty containers, as well as areas not directly part of the seagoing leg but nevertheless important, such as the right to provide port services and other supply chain/logistics activities in foreign countries.

ICS has been encouraged by the efforts of the government negotiators at WTO that have formed the ‘Friends of Maritime Group’. ICS was pleased to attend a special seminar for WTO negotiators on maritime services, hosted by the Group in Geneva in February 2005. Comprising over 50 countries, the Group has stressed the importance of efficient maritime services to the health of the world economy and thus its importance to countries, including those in the developing world, which have not yet made offers in response to requests.

So far, maritime offers have been made by 20 countries (the EU counting as one), most of which refer to the ‘Maritime Model Schedule’ previously developed by WTO. There are concerns about the quality of some of these offers, but China and India at least, who already have (or are about to have) bilateral maritime agreements with the United States and Europe, appear to have signaled that they are taking the maritime negotiations seriously. The United States, however, still shows little willingness to engage fully, due to pressure from domestic constituents who mistakenly fear that a WTO agreement on maritime services would impinge on the Jones Act concerning cabotage protection. That said, Europe and China would like to make inroads into the carriage of international feeder cargoes that pass through US ports.

The next milestone for the WTO service negotiations is expected to be a Ministerial Conference in Hong Kong in December 2005, at which a political decision will be made on whether to push for a final agreement in 2006. In practice, however, the WTO discussions have a habit of stalling, not least due to the separate but related discussions on controversial areas such as agriculture.

The current EU review of its maritime competition regulations could affect all shipping companies trading to Europe and is likely to influence the future shape of competition rules elsewhere. In December 2004, ICS submitted comments to the EU Competition Directorate in response to its ‘white paper’ proposing the abolition of liner conferences through the removal of their current block exemption from EU competition rules. This followed a year long consultation exercise, though it has been hard to avoid the suspicion that the Commission has adopted an ideological approach from the beginning.

In addition to reiterating the stabilising benefits of conferences on volatile and cyclical markets, ICS has highlighted the international implications at the regulatory level of unilaterally abolishing conferences in Europe, such as conflict with existing EU treaty commitments with its trading partners.

ICS policy is to defend the preservation of liner conferences internationally, including the authorisation of rate fixing, as it has been doing in Australia where the benefits of conferences and discussion agreements are also being reviewed by the government. In Europe, however, ICS joined ECSA in supporting the regime proposed by the European Liner Affairs Association (ELAA), which represents the larger containership operators trading to Europe. This has been suggested as one of several alternatives in the event that the European Commission decides, as expected, to prohibit conferences in their existing form. But there are concerns in some quarters that the abolition of rate fixing could be more disadvantageous to smaller operators, especially in ‘north-south’ trades.

It is unclear what form the final EU legislation will take and discussions with the Commission will continue up until the publication of firm proposals, probably at the end of 2005.

The European Commission is also reviewing the application of competition rules to tanker, dry bulk and specialised trades, following proposals to extend its competence in this area, one of the few remaining industry sectors to which the Commission’s powers to undertake investigations and ‘dawn raids’ do not currently extend.

The industry is confident that the vast majority of operators do not fall foul of EU law, but lawyers and financial advisers are already suggesting that they may wish to review their operations. Given the potential penalties (although subsequently annulled by the courts, in 1999 a group of liner companies were jointly fined 270 million Euros for alleged violations of EU competition rules) the industry has entered into a dialogue with the Commission. In 2004, this included ECSA and ICS jointly commissioning a report by Clarksons Research explaining the workings of the tramp market. ICS is pleased that in response to industry requests the Commission has indicated that it is willing to produce guidance to provide the industry with the clarity it needs, which it is hoped will confirm the acceptability of practices such as shipping pools.

In late 2004 the Panama Canal Authority (PCA) announced formal proposals to modify the charging mechanism for ships carrying containers, claiming it was correcting an anomaly regarding dues paid by ships carrying containers dating back to 1997. The proposals took some account of industry feedback, following meetings between the PCA and both ICS and the World Shipping Council, and attempted to allay concerns regarding the treatment of non-cellular container ships. However, the fundamental change from a tonnage based system to one based on container-carrying capacity conceals increases considerably higher than anticipated ($42 per teu from 1 May 2005, increasing in stages to $54 per TEU in May 2007, while the equivalent charge before was some $32). At a public hearing in Panama in January ICS made clear the industry’s opposition to the size of the proposed TEU charge.

In the near future the industry also has to anticipate long term Canal ‘surcharges’ to fund the construction of a third set of locks, assuming that the Panamanian referendum on the project, expected in November 2005, gives authority for it to proceed.

Meanwhile, ICS has produced a model plan to assist operators meet new Panama Canal oil spill contingency plan requirements. From January 2005 all ships transiting the Canal have had to submit an individualised Panama Canal Shipboard Oil Pollution Emergency Plan (PCSOPEP), for verification by the PCA. This is in addition to the normal MARPOL SOPEP and includes details of emergency preparedness strategies for use specifically in Panama Canal waters. The ICS model, approved by the PCA, provides comprehensive guidance on preparing the ship specific PCSOPEP, and has been distributed to owners via national shipowners’ associations.